The transfer of funds between individuals lies at the heart of a variety of transactions. In single-party transactions, for example involving an account-holder who either deposits or withdraws money from his/her account (e.g., a bank account), only one party participates in the process, although one or more financial institutions may be involved. In unmediated two-party transfers, for example cash transfers between a buyer and a seller in payment for goods or services, gift transfers, loans, etc., there are two parties involved in the transaction. Finally, in mediated three-party transactions using credit or debit cards or checks, a guarantor or other third party in addition to the payer and payee is involved. Increasingly, some or all of these transfers may be completed electronically, making use of computer networks and/or networks of networks, such as the Internet.
Among the more recent developments involving mediated three-party transactions are the expanded opportunities for the use of the Internet as a vehicle by which transfers may be arranged and/or implemented. For example, Internet-based bill presentment systems are now being offered in which a merchant (e.g., a local telephone company or other utility provider) may arrange for regular bills to be delivered electronically to a consumer. The consumer is then offered the option of paying the bill electronically by providing the bill presentment service provider with bank account information and payment authorization. This information (and the accompanying authorization) allows the bill presentment service provider to arrange for the transfer of funds between the consumer's account and that of the merchant, for example using the Automated Clearing House (ACH) funds transfer facilities of the banking industry. Presently, however, such systems are asymmetrical in as much as they do not provide means for individual consumers to arrange for the transfer of funds to or from merchants or other consumers.
Moreover, although the popularity of the Internet has led to a dramatic expansion of e-commerce opportunities, with these opportunities comes the increased risk of fraud in e-commerce transactions. Indeed, some have estimated that close to 40% of the total number of attempted orders placed to Internet merchants are fraudulent or otherwise unapproved credit transactions. See, “Credit Card Fraud Against Merchants”, document 22198, CyberSource Corporation, at p. 3 (1998). To combat these fraudulent transactions, others have developed authorization and verification services which attempt to provide some assurance to a seller that a buyer is who he or she is purports to be. Some of these authorization and verifications services include risk management assessment capabilities that score buyers and allow merchants to assess whether or not a transaction should be completed based on the score.
Although these verification services provide some degree of protection against fraudulent e-commerce transactions, they are for the most part limited to a select group of users—namely large merchants. Because of the fees and other system requirements associated with presently existing verification services, small merchants and/or individuals are generally unable to make use of them.
It is also true that wire transfers between individuals across private networks have been available for many years. However, such schemes lack the convenience offered by the Internet. To illustrate, consider that in most wire transfer schemes (other than wire transfers between banks, etc.) an individual (the payer) is required to deposit the funds to be transferred at a physical location (e.g., a local branch office of the wire transfer service). Upon such deposit, payment instructions are transmitted to a remote branch office of the service, where the payee must then present him/herself to receive the funds. While such systems may provide international service, they are cumbersome in as much as both the payer and the payee are required to be physically present to deposit or receive the funds. Often this is impossible, or at least inconvenient, for one or both of these parties.
With wire transfers from one individuals' bank account to another (e.g., utilizing the FEDWIRE system), an initiator must know the recipient's account information and specify it to a bank or other financial institution. Such transactions currently cannot be initiated by consumers using an Internet resource.
Other limitations of current funds transfer schemes (both electronic and otherwise) are highlighted in the transactions that typically occur in on-line, person-to-person auction houses. During on-line auctions, prospective buyers bid on products being offered by sellers. At the close of such bidding, the seller and highest bidder (now the buyer) are notified that the auction has been completed and are usually invited to contact one another to complete the sale. Rarely, if ever, though does the auction house provide a mechanism for the transaction to be completed. Instead, the buyer and seller are left to determine amongst themselves the best way to exchange the goods for payment.
Because the sellers tend to be individuals and not traditional merchants, the sellers often are unable to accept (or, indeed, unwilling to accept) credit cards. Moreover, because the buyers are dealing with an individual seller whom they may not know, the buyer is less likely to be willing to provide such credit card information. Further, as indicated above, the current electronic funds transfer mechanisms are simply not able to accommodate individual-to-individual transfers. This leaves personal checks, which are inconvenient to generate, mail and deposit for the buyer and seller, and which may cause delay in shipping as sellers wait for checks to clear, cashiers' checks, money orders or wire transfers (some or all of which often have processing fees associated with them, not to mention the inconvenience of having to obtain a payment instrument from a bank or other institution) as the only viable payment options. Generally, none of these solutions are very satisfactory from the buyer's point of view, yet the buyer is left having to choose one of these options if he or she wishes to complete the sale. Thus, there is a need for a payment transmission system for e-commerce transactions and/or to facilitate money transfers between individuals and/or small merchants that overcomes the limitations of existing schemes.